Opportunity knocks for independents: it's fat city for independent brokers today—and not just because of Eliot Spitzer's investigation, which has companies wondering just who exactly their broking bedmates are

Risk & Insurance, July, 2005 by Lawrence Richter Quinn

Of the $27 billion in global brokerage revenue in 2002, Marsh had a 31 percent market share, Aon a 23 percent market share, and Willis a 7 percent market share, according to Swiss Re. Thus, 61 percent of the global brokering market was controlled by three firms.

Losing that kind of market share isn't about to happen anytime soon because of a temporary scandal.

Marsh's clients, says the broker's new CEO, Michael G. Cherkasky, benefit from the firm's ability to deliver value and access to capital, particularly for large and middle-market corporations.

"We think we have services people like and value," he said, speaking at the annual gathering of risk and insurance managers in Philadelphia earlier this year. "It's all about value."

Clients benefit from his firm's ability to provide a suite of servies ranging from risk assessment to risk management, risk mitigation to risk transfer, and even to risk management information systems technology.

While the independents may be more focused on services, they are also limited in their ability to handle complex risks, according to the brokerage leaders.

"If you are talking about a large midmarket client with risk managers or a large corporate multinational, you're talking about complex risks that need the intellectual capital to be able to help manage those risks," says Patrick G. Ryan, Aon's executive chairman. "The scale of those risks has changed dramatically. The complexity has changed dramatically."

The sign that the big brokers are still a force to be reckoned with is that many of Marsh's clients have decided to stay with the company.

Many could have abandoned the company in the wake of its bid-rigging scandal, and even sunk the firm, Cherkasky also says.

In some cases, clients have shifted only a percentage of their business out of Marsh to the independents, thus retaining a portion of their book of business with the giant brokerage firm.

CALCULATED MOVES

Leaving a large broker after many years is never easy.

Corporate executives looking for a new broker point out that their moves to the independents aren't made lightly and often involve a rigorous request for proposal process.

Consider Framingham, Mass.-based Bose Corp., a company well-known for sound excellence in its home entertainment and automobile systems. When searching for a brokerage firm, the privately-held company insisted that its broker adopt the management system--the philosophy--employed by Bose.

"We employ several types of management systems to achieve our performance objectives," says Jack Bailey, manager of environment, safety and risk and an Acordia client. "We're ISO- and QS-certified and use Lean Six-Sigma as part of our quality and management regimens. We plan for change, growth and continual improvement."

Bailey calls "continual improvement" a key driver of the company.

Acordia, which was brought on board in March 2003, "was comfortable with our approach and offered suggestions for new ways to handle our business," says Bailey. "As a result, it suggested holding monthly improvement meetings to cover claims reviews and our risk management status, and take a look at new developments or new products. These meetings have been very instrumental to us in keeping up with a changing marketplace and with developing exposures as we grow our business."